管理層發言
Welcome to the Beneficient Second Quarter Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Dan Callahan, Director of Communications. Please go ahead.
Good morning, everyone. Thank you for joining us today for Beneficient's fiscal Q2 2025 conference call. In addition to this call, we issued an earnings press release that was posted to the Shareholders section of our website at shareholders.trustbend.com. Today's webcast is being recorded and a replay will be available on the company's website. Today's call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Actual results and future events could materially differ from those discussed in these forward-looking statements because of factors described in our earnings press release and the Risk Factors section of our Form 10-K and in subsequent filings we made with the Securities and Exchange Commission. Forward-looking statements represent management's current estimates and Beneficiant assumes no obligation to update any forward-looking statements in the future. Today's call also contains certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website, for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. On the call this morning are Brad Heppner, our CEO and Chairman, and Greg Ezell, Chief Financial Officer. I'll hand the meeting over to Mr. Heppner. Brad, take it away.
Good morning, everyone, and thank you for joining us this morning. In our second fiscal quarter ending September 30, we continued to build on our progress from Q1 with a number of positive developments. The management team has also been busy meeting with the investment community, including our participation earlier this week at the Corp. Gov. Forum and other investor conferences earlier in the quarter. Interest is high in how Beneficient is democratizing private equity and delivering custody and transaction services for all types of alternative assets. Beneficient was created to provide fiduciary products and services that deliver liquidity and primary capital for holders and managers of all types of alternative assets. We are developing our business to focus primarily on the target markets of mid to high-net-worth individuals and small to mid-sized institutions who have been underserved when it comes to exiting alternative assets prior to their maturity, in addition to general partners. We estimate that mid- to high-net-worth investors and small to mid-sized institutions in the U.S. alone account for more than $2.7 trillion of net asset value, with an annual unmet demand for liquidity of over $61 billion annually, growing now to more than $100 billion within the next 5 years. Further, the market for general partners seeking liquidity for their limited partners through restructurings in the secondary market is in excess of $100 billion annually. That means that when combined, our platform addresses a demand for secondary market liquidity from mid- to high-net-worth investors and small to mid-sized institutions and general partners and LPs of over $150 billion per year and growing. The traditional process for these smaller investors seeking liquidity is incredibly complex, expensive, and time-consuming, often taking as long as 15 months or more, if liquidity can be found at all. To address this problem, we built our own FinTech platform called Ben AltAccess, with the goal of completing these important transactions online in a fraction of that time, now potentially in as few as 15 days with the introduction of our new machine automated pricing system, or MAPS, for short. In addition to demand for liquidity from alternative assets, our market faces a substantial demand for more primary capital into new alternative assets. For general partners seeking this capital, sourcing has become increasingly difficult, and there are few innovative new solutions to solve this problem. PEI data shows that it has been taking an average of 18 months for general partners to raise their private equity funds, which is approximately double what it took them just 3 years ago. The good news is that we understand both of these markets and have solutions tailored to their needs, which are the foundations of our business and have now produced two quarters in a row of profitable progress for our shareholders. As a recap, during our first quarter ended June 30, 2024, we provided a number of positive announcements. First, we announced a unique primary capital fiduciary financing product for general partners starting new funds, which we see as a robust, large adjacent market to our liquidity fiduciary financings. Second, we initiated MAPS, which streamlines the pricing for our ExAlt Loans that are backed by alternative assets. MAPS integrates enhanced algorithmic capabilities designed to handle a higher volume of transactions with greater efficiency and reduced transaction time to potentially as little as 15 days. Third, our Board of Directors approved the ExchangeTrust product plan to complete up to $5 billion of fiduciary financings to Customer ExAlt Trusts through ExAlt trust transactions. And fourth, we reported a profitable quarter, our first as a public company. These developments last quarter provided meaningful enhancements to the operating model of Beneficient, improving on the competitive dynamics we believe we already possess. Our work is not done. In the second fiscal quarter ended September 30, 2024, we continued to build on those successes, delivering a second consecutive quarter of positive fully diluted earnings per share for our common shareholders, which Greg will discuss in just a moment. However, before we get into the numbers, I want to touch on a few key business highlights. First, in September, we announced a transaction that involved the reclassification of certain preferred equity, improving our permanent equity by $126 million. This improvement turned our permanent equity from a deficit of $148.3 million to an adjusted deficit of $13.2 million. We will continue through this quarter on our plan toward completing transactions that will turn the deficit into a surplus of permanent equity. Additionally, we undertook a further SEC registration filing to put into effect our standby equity purchase agreement for issuance of up to 203 million shares of Class A common stock, which could provide Beneficient with significant capital. I'm pleased to report that this registration statement was declared effective just three days ago. These transactions are part of our plan to meet important listing requirements as well as to provide a source of capital for completing fiduciary financings backed by alternative assets and represent a significant expansion of our balance sheet. Next, in October, the company announced the appointment of Patrick Donegan as an independent member of the company's Board. Mr. Donegan brings almost 30 years of compliance, legal, banking, and capital markets experience to Beneficient, having held various senior compliance positions. Through his legal experience and compliance officer roles, Mr. Donegan has developed expertise in identifying risks and establishing policies and procedures to effectively manage those risks. He serves on multiple committees of the Beneficient Board, including our Audit Committee. Finally, since our public listing in early June 2023, a significant portion of our company's publicly listed Class A common stock was in the hands of a single holder, the liquidation trust of a prior parent company. Over the past 12 months, that trust has been consistently in the market selling a significant amount of their Beneficient holdings. As of their last filing date on October 4, the trust now holds about 8% of our outstanding shares, having sold over 90% of their position into the market. This is a significant reduction to an overhang that has weighed on our stock price performance over the past year or more and has resulted in the distribution of our shares across a much broader shareholder base. I'm proud of our efforts in the first two quarters of fiscal 2025. We have improved the product offerings of the business, been introduced to new adjacent markets in need of our solutions, and streamlined our cost structure to become a leaner, more efficient company, ready for scale. We've taken steps to expand our balance sheet and improve liquidity with our standby equity purchase agreement. We are methodically managing the outstanding regulatory and legal issues, and the headwinds from our largest shareholders selling their stock should now be abating. With these improvements in motion, we will continue to work to educate the market on who we are, what we do, and the value and growth opportunity we represent for shareholders. We're moving forward, and I look forward to continuing to report progress on our key initiatives through the second half of this fiscal year. Now, with that, I'll turn the call over to our CFO, Greg Ezell, to go over our operating and financial results.
Thank you, Brad. Let's now turn to our quarterly results and financial position as of September 30, 2024. First, I'll start with a few highlights from the quarter. We reported investments with a fair value of $335.0 million, up sequentially from $329.1 million at the end of our prior fiscal year. These investments serve as collateral for Ben Liquidity's net loan portfolio. GAAP revenues were a positive $8.6 million for the second quarter and $18.6 million for the year-to-date periods in fiscal 2025 as compared to a negative $42.8 million and $45.5 million in the prior year. GAAP revenues principally reflect mark-to-market adjustments on the investments that serve as collateral to Ben's loan portfolio. Excluding the noncash goodwill impairment and the loss contingency accrual release in each period, operating expenses were $22.0 million in the second quarter of 2025 and $39.3 million in the year-to-date period, which reflects a decline of 31.9% and 55.9% in the quarter and year-to-date periods. The improvement was primarily related to improvements in compensation and benefits expense. The primary reduction is related to lower share-based compensation expense of $5.1 million for the quarter and $31.1 million year-to-date as compared to prior periods. The reduction also reflects lower headcount in certain areas and a higher level of automation throughout the organization. GAAP net income for the current quarter was $9.7 million and $54.1 million for the year-to-date period. This led to basic earnings per share of $2.98 for the quarter and $14.58 for the current fiscal year for the Class A common stock. On an adjusted basis attributable to Ben's equity holders, we had an operating loss of $2.3 million as compared to a $12.0 million operating loss in the second quarter of the prior fiscal year. Permanent equity improved from a deficit of $148.3 million as of June 30, 2024, to a deficit of $13.2 million as of September 30, 2024. Next, we'll move to our primary business segments: Ben Liquidity, which generates interest revenue, and Ben Custody, which produces fee revenue for the use of the platform and trust services. During the second quarter of fiscal 2025, Ben Liquidity recognized $12.0 million in base interest revenue, up 10.4% from the prior quarter. Operating income for the quarter was $2.9 million compared to an operating loss of $0.5 million for the prior quarter. Our cash and cash equivalents at the end of the quarter were $4.5 million, and our total debt was $124.1 million. Distributions received from alternative assets for the quarter totaled $5.3 million and $12.5 million year-to-date compared to $14.3 million and $26.3 million for the same period in the prior year. That concludes my remarks for the quarter.
分析師問答
Our first question comes from Michael Kim with Zacks Small-Cap Research. Your line is open.
Good morning. Thank you for taking my question. First, I'd just be curious to get your thoughts on what you may be seeing in terms of demand trends and loan originations. So just wondering if you've seen a step-up in activity just following the introduction of the MAPS pricing system and the Board's more recent authorization of the ExchangeTrust product plan. And then just related to that, any perspectives on your marketing and advertising efforts just to capitalize on that demand?
Good morning, Michael, this is Brad. I'll address your question here. I appreciate your attending today. What we're seeing for the demand is the demand for liquidity from private market assets has not abated from our vantage point. If anything, as investors continue to allocate to private market assets, the pent-up demand that we've been speaking about for some time continues to grow, and there's still largely unmet demand from other industry solutions. I've always said I don't believe that there's near enough capital in the industry. The amount of demand, the distributions have been slowing over the last 2 to 3 years. We've got a lot here to come out and experience once investors continue to pursue their need for liquidity. Now we're excited to have launched MAPS this past quarter. It came out of beta, and we launched it. We continue to be encouraged by the results that it's going to reduce the time required to underwrite and value private market assets to as little as 15 days. Now that compares to institutional transactions that can take as long as 15 months. Because we have standardized documentation examined by banking regulators, we are now able to reduce that time, and we're hoping to get that down to 15 days. We plan on further developments to MAPS with potential for increased functionality rolling into 2025. We were limited in our ability to close liquidity and primary capital transactions during our second fiscal quarter due to seeking stockholder approval to increase the number of authorized shares of common stock. We received that in October. We expect to begin closing deals again later in this quarter. It takes time for the authorization of stock that fuels our balance sheet to finance these attractive liquidity offerings. Despite this limited ability to close transactions, we've actively been working with our key customer segments. We've seen encouraging green shoots for our business, and that includes our digital marketing and advertising strategy that pushes Beneficient content. It also includes our proprietary sourcing channels and our advisory channel. We are becoming much more active in industry conferences and events, which lead to additional lead generation. This market strategy overall has resulted in continued market awareness across all of our product suite. Specifically, our GP solutions primary commitment program and our ExchangeTrust products are gaining traction. We are particularly encouraged by the positive results from all of our efforts in the second quarter. It's now the third and fourth quarters where we need to bring those results home for Beneficient.
Got it. That's very helpful. Appreciate that, Brad. And then any updates on your new business initiatives that you've previously mentioned around related services and alternative securities lending?
Yes. We continue to work on both of those with a dedicated team focused on those initiatives. Our total addressable market is in the Investor Relations deck, showing that over $2 trillion net asset value is held within Beneficient's target markets in the U.S. alone. We expect liquidity from these target markets to be in the $60 billion range, with the additional $100 billion growing over the next 5 years alone. The industry participants can expand that overall with a scalable lending platform. We believe we are nicely positioned to potentially provide a platform that will help introduce potential lenders with private market investors seeking to borrow against their alternatives. We are having productive conversations with key partners and customers across the private market ecosystem, and we hope to introduce lending platform solutions for alternative assets and investors in the first half of 2025. These ongoing initiatives are promising, and I view them as potentially as significant as our current market.
Got it. And then maybe just finally, just curious with the new administration coming in, would you anticipate that we could see a renewed cycle of investment focused on starting new businesses and the capital needs to support that trend and how that might potentially drive a step-up in the need for liquidity?
It's great that you asked that question. I just completed a conference at the Corp Gov Conference, one of the first following the election, and there was substantial discussion on this point. The general assumption is that we'll be entering a much more favorable capital formation economy in the United States, led by various expected regulatory changes. The conference participants were specifically excited about this outcome, anticipating a much more robust public offering market, which will lead to increased liquidity and should correlate with expansion in deals getting done. It's important to note that we're coming off of about 3 years of very poor fundraising results in the industry. However, as we look forward, we should expect an increase in liquidity, enabling deals to be completed and transactions to progress. The storm that we've observed is showing signs of lifting, and this is correlated with stronger capital markets. Overall, this should present good opportunities for Beneficient to facilitate liquidity in the market and create investments moving forward.
Our next question comes from Brendan McCarthy with Sidoti. Your line is open.
Thank you. Good morning, everybody. I wanted to start off on the alternative asset collateral portfolio. Can you provide some incremental color on how that underlying asset is performing more broadly? And are you seeing signs that monetization and distribution are starting to pick up?
Brendan, it's Greg. I'll provide a few comments related to our collateral portfolio, and then Brad will share some views on industry performance more broadly. Generally speaking, we're very pleased with the underlying asset collateral performance. Excluding interest in our parent company, over the last few quarters, including the quarter we reported on today, we have seen positive increases in the unrealized NAV of that portfolio. Over the last two quarters, total NAV has increased despite distributions. In terms of distributions, as I mentioned in the prepared comments, we have seen a year-to-date fall in distributions compared to the same period last year. When considering it as a percentage of the beginning NAV for each period, it equates to about a 28% decline in the distribution rate, which is well off long-term norms that one might expect for the portfolio. Potential activity in the collateral portfolio indicates that we are seeing early indications of a potential uptick in distributions as general partners report letters of intent for portfolio sales and IPO explorations. However, it's still at an early stage.
Yes, I would. If we look at the industry overall, the norms for an alternative asset diversified portfolio, specifically in our industry, have historically seen a distribution rate of about 16% of net asset value per year. Recently, however, we've observed a significant decline in distribution rates. Over the past 2 years, we have seen those fall to around 8%. This is 30% below the low end of the expected range, which is very concerning. Only the best-managed funds have continued to deliver distributions over the last 2.5 years. Although we've been disappointed with the industry's distribution rates, we have seen steady net asset values with slight increases in unrealized gains, suggesting that future distributions could improve. Our portfolio is comparable to the industry, with distributions projected to accelerate now.
That's great. Really appreciate the color there. One more question for me. Can you walk us through the transaction that reclassified roughly $126 million of temporary equity to permanent equity? And what benefits does this provide from a capital or regulatory perspective?
Yes, Brendan, it's Greg. I'll take that one. The transaction involved dividing a portion of the existing preferred Series A security into a new security. So, 50% of the existing balance will remain under the previously existing security, and 50% will be allocated to a new security that has the same terms, except it does not include a cash redemption feature. Previously, because of both a cash redemption feature and an equity conversion feature, the preferred security required classification as temporary equity under U.S. GAAP. With this reclassification, we now meet the permanent equity requirement necessary for compliance with Nasdaq listing standards, moving us closer to a compliant status.
There are no further questions. I'd like to turn the call back over to Dan Callahan for any closing remarks.
Just want to thank everybody for attending this morning. A reminder that the replay of this call will be available on the Shareholders section of trustben.com. I wish everyone a great Friday.
Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.